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Cryptocurrency exchange Bybit takes global spotlight in void left by FTX
(Bloomberg) — A cryptocurrency exchange operated by Bybit Fintech Ltd. rose to second place globally by trading volume, after targeting former customers of the defunct FTX platform and users in Europe and Russia.
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Dubai-based Bybit’s growth has been spurred by filling the gap left by FTX with a service that allows digital tokens to be used as collateral for margin trading, co-founder and CEO Ben Zhou said in an interview .
“When FTX collapsed, we saw the opportunity,” Zhou said, referring to the failure of jailed Sam Bankman-Fried’s popular but fraudulent platform.
Bybit’s share of trading volume has doubled to 16% since October, surpassing U.S. leader Coinbase Global Inc. in March, according to data from Kaiko. Zhou’s platform is second only to Binance Holdings Ltd. for spot and derivatives transactions.
Crypto Recovery
Exchanges have benefited from a doubling in the price of Bitcoin over the past year as dedicated U.S. exchange-traded funds debuted. The jump is the return from a bear market and a period of scandals characterized by the collapse of FTX in 2022.
Soon after that crash, Bybit unveiled a trading account that allows cross-margin trading using over 160 tokens. Users can also leverage unrealized profits to open new positions. “This was something no one else had,” Zhou said.
Europe is currently Bybit’s largest market, contributing around 30%-35% to volumes, according to Zhou. Separately, about a fifth comes from the Commonwealth of Independent States, within which Russia is the largest source of business, he added. The CIS is a loose grouping of former Soviet nations.
Bybit has to walk a fine line in Russia, whose use of cryptocurrencies is under intense scrutiny for potential violations of sanctions imposed following President Vladimir Putin’s invasion of Ukraine.
The sanctions trap
Bybit monitors Russian customers and follows “very strict sanctions rules,” Zhou said. The company is opening an office and seeking a digital assets license in neighboring Georgia after obtaining a permit in Kazakhstan last year.
“We see a lot of growth in these areas,” Zhou said. “It’s also a new developing area that has nice potential.”
The progress of the six-year-old exchange also comes on the heels of a plea deal between market leader Binance and US authorities in November. The settlement included a $4.3 billion corporate fine and prison time for Binance co-founder Changpeng Zhao for fines and anti-money laundering violations.
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Bybit, which is considered an “offshore” exchange that primarily serves overseas customers, is undergoing a reset due to tightening regulations governing sprawling digital asset businesses.
New markets
Europe is slowly being supplanted by new markets as rules introduced as part of the cryptocurrency markets regulation restrict some products, Zhou said, citing Brazil, Turkey and Africa as new sources of growth.
Earlier this month the platform opened to Chinese citizens who can prove they live outside the country, even though Beijing has banned cryptocurrency trading. Zhou has reported growing demand from Chinese expatriates and legal assessments suggest the risks of serving them are “relatively low”.
Another area of interest is the relationship between platforms and prime brokers, who act as a key source of liquidity in cryptocurrency markets, matching institutional traders to exchanges. Bybit said in May that it had begun a “compliance review” of its dealings with prime brokers. “Now, if you are a prime broker, we need to know who you are dealing with,” Zhou said.
Bybit has more than 30 million users and was founded in 2018, according to its website. Its 24-hour trading volume was $2.9 billion, nearly half of Binance’s $6.3 billion, according to CoinGecko data. The company has offices in Dubai, Singapore, and Hong Kong and will open its first European office in the Netherlands around August, Zhou said.
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